CryoLife, Inc. ( CFX)

Q3 2011 Earnings Call

October 27, 2011 10:30 am ET

Executives

Steve Anderson - President & CEO

Ashley Lee - CFO & EVP

Analysts

Matt Dolan - Roth Capital Partners

Raymond Myers - Benchmark

Joe Munda - Sidoti & Company

Presentation

Operator

Greetings, and welcome to the CryoLife Third Quarter 2011 Financial Results Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (Operator Instructions) As a reminder this conference is being recorded.

It is now my pleasure to introduce your host, Steve Anderson, President and CEO for CryoLife. Thank you. Mr. Anderson, you may begin.

Steve Anderson

Good morning everyone. This is Steve Anderson, CryoLife’s CEO. And I would like to welcome you to CryoLife’s third quarter 2011 conference call. With me today is Ashley Lee, CryoLife’s CFO and Executive Vice President.

This morning, we announced quarterly revenues of $29.7 million, a 4% increase over the same period last year. Our earnings for the third quarter were $0.07 compared to a loss of $0.11 in 2010.

BioGlue’s quarterly sales in Japan are ahead of our expectations again. As we previously communicated, we had predicted that we would sell $600,000 worth of BioGlue in Japan during its first 12 months on the market there. Instead, we had sold over $1 million of BioGlue in the first six months; it has been on the market in Japan. We were also pleased with sales of $2.1 million of the Cardiogenesis products during the quarter.

The agenda for today’s call is as follows. Ashley will discuss this morning’s press release in detail and by product. He will update you on the integration of the Cardiogenesis acquisition into the CryoLife product line. He will also discuss the first-in-man implant of three valve exchange valves in Paraguay and the timetable for the application for a CE mark for this valve. I will discuss and describe our recent acquisition strategy and the reposition the company to a higher growth cardiovascular surgery products. I will discuss our acquisition of PerClot, a powdered hemostatic agent; it’s European sales success and our plans for filing an IDE for PerClot in the United States.

At this time, Ashley will comment on this morning’s press release.

Ashley Lee

Thank you, Steve. To comply with the Safe Harbor requirements of the Private Securities Litigation Reform Act of 1995, I would like to make the following statement. Comments made in this call that look forward in time, involve risk and uncertainties in our forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

The forward-looking statements include the statements made as to the company’s or management’s intentions; hopes; beliefs; expectations or predictions of the future including the guidance for 2011 that I’ll provide in a moment.

Additional information concerning risks and uncertainties that may impact these forward-looking statements is contained from time-to-time in the company's SEC filings, including the Risk Factor section of our previously filed Form 10-K for the year-ended December 31, 2010, and our subsequently filed Form 10-Qs and in the press release that went out this morning.

On the call today, I will discuss certain non-GAAP financial measures. You can find the comparable GAAP measures and a reconciliation of these non-GAAP measures to the applicable GAAP measures in the press release that went out this morning. A copy of which is contained on the Investor Relations portion of our website.

This morning, we reported our results for the third quarter and first nine months of 2011. Before getting into the details a few highlights of the quarter included the fact that we continued executing on our strategy to position the company in higher growth and larger addressable market opportunities with our investment in ValveXchange, our ongoing integration of the Cardiogenesis acquisition, and continued progress in rolling out PerClot in international markets, while preparing for the resubmission of our IDE to being U.S. clinical trails for PerClot.

We also had an all time third quarter revenue record of $29.7 million, driven by strengthness in the recent acquisition of Cardiogenesis. An increase in gross margins for the quarter compared to the prior year and a strong balance sheet, which continues to position us to pursue business development opportunities to potentially accelerate the growth of our business.

As I previously mentioned we set an all time third quarter revenue record of $29.7 million. The following factors influenced our revenue performance. Total international revenues were up 33% in the third quarter compared to the prior year and up 27% for the nine month period compared to the prior year. We saw strength across our international business on a quarterly basis compared to the prior year, with tissue processing revenues increasing 18%, combined BioGlue and BioFoam revenues increasing 36% and powdered hemostat revenues increasing 24%.

Worldwide BioGlue revenues were up 10% for the third quarter and up 5% for the nine month period. These increases were predominantly driven by volume increases, particularly in Japan, due to the recent launch of the product. This was the largest year-over-year quarterly increase for BioGlue revenues, since third quarter of 2008, and we continue to remain enthusiastic about the opportunity in Japan.

Total sales in the third quarter in Japan were $651,000 and year-to-date in Japan were approximately $1.2 million. To-date, approximately 250 surgeons have been trained and over 160 accounts have ordered product. We expect another large order from Japan before the end of the year.

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